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Enterprise Risk Analytics

Assignment 1

What to submit?

Please submit (i) a word file explaining in detail your answers to each question (you can use screenshots of the R to explain your answers) AND (ii) an R file with a separation for each question. For each question, make sure you develop the model and present the simulation results – the R file should be self-explanatory. The assessment of your work will include both the accuracy and the clarity of your word file and the R Code.

1. Consider a call center that receives its demand over a set of different travel websites. The weekly demand for each website is normally distributed with a mean and standard deviation given in Table 1. Develop a R script that calculates the average total call center demand and its standard deviation.

Table 1: Weekly demand of travel sites (in hours)

2. A cell phone manufacturer is considering to offer a refund to its customers whose battery fails before 5 years. The refund is equal to $1 per 1 month short of 5 years.  Previous studies show that a battery’ life is normally distributed with a mean of 6 years and standard deviation of 1 year. What is the expected cost per cell phone to the manufacturer of this offer?

3. A convenience store needs to make a decision of how many packages of California rolls prepare for tomorrow. A package of California rolls cost the store $2.00 and it sells for $6.00. Daily demand is normally distributed with a mean of 100 packages of California rolls and a standard deviation of 40 packages of California rolls. If there are leftovers at the end of the day, the store donates them. Develop a R model that simulates the daily profit resulting from the preparation of 50, 75, 100, 120, 140, 160 packages of California rolls in a day (run them one at a time). Of these 6 options, which option maximizes the expected profit?